Total housing starts in July fell 6.1 percent to a seasonally adjusted annual rate of 1.381 million, the lowest mark since January 1997, according to data released today by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. Also reaching a ten-year low are building permits, which fell nearly 3 percent from June to an annual rate of 1.373 million.
"It wasn't much of a surprise," Global Insight Economist Patrick Newport told BUILDER Online. Thursday's report also revealed that single-family permits in July fell 1.6 percent, their 19th decline in the 22 months. This, according to Newport, is a "key statistic."
"This number matters more than housing starts because it is much better measured, making it less volatile, less influenced by weather, and because it is a bellwether for future construction activity," Newport says.
Newport predicts that permits in August will slip farther and housing starts will decline 3 to 5 percent more. "The report is consistent with all of the housing news that is coming out, which is that housing is in a recession and everything is still slumping," Newport explains. "I think we're going to see some really bad numbers over the next 1-3 months because it is getting harder to get a mortgage."
On Wednesday, the National Association of Home Builders/Wells Fargo housing market index was announced, falling two points in August to 22. The housing market index is a monthly sentiment gauge of the nation's home builders. The current levels are the lowest since January 1991. The current index indicates that about a fifth of builders nationwide think the market is "good." A year ago, the index was at 33. Two years ago it was at 67.
In addition to Thursday's report, the NAHB announced that its forecasts for home sales, housing starts, and residential fixed investment have been revised downward again for 2007-2008.
"We're now expecting home sales to trail downward through all of 2007 and we don't expect systematic improvements to housing starts and RFI until the second half of 2008," says David Seiders, the NAHB's chief economist. "We're looking for solid increases in 2009, however, and the housing market will have good growth potential further down the line."